PSE Circular for Brokers No. 495-00

February 29, 2000 PSE CIRCULAR FOR BROKERS NO. 495-00 METRO PACIFIC REPORTS FULL YEAR PROFIT OF PHP 2.4 BILLION Metro Pacific Corporation (MPC) reported today unaudited consolidated net earnings of Php 2.4 billion for the year ended 31 December 1999 representing a sevenfold increase compared with the Php 329 million net earnings for 1998. The 1999 net earnings were sourced primarily from (a) the gain on partial sale of MPC's interest in Smart Communications, Inc. ("Smart") to Japan's Nippon Telegraph & Telephone (NTT) amounting to Php 2.7 billion, which brought down MPC's stake in Smart from 52% to 38%, (b) the gains on the sale of Metro Bottled Water Corporation (Php 933 million) and Metrolab Industries Inc. (Php 680 million), and (c) a Php 325 million reversal of provisions by Fort Bonifacio Development Corporation ( FBDC ) for lot returns. These exceptional items were, however, offset partly by (a) a Php 1.4 billion provision against the value of MPC's investments in its subsidiaries and affiliates (b) a Php 119 million provision by Nenaco for the decline in the value of its assets and (c) the Php 81 million loss incurred by Nenaco related to the destruction by fire of its St. Francis vessel. Consolidated revenues for the year amounted to Php 11.6 billion slightly higher than the Php 11.3 billion level recorded in the previous year. (The 1998 figures have been restated to be comparable with the 1999 results). Operating profit for 1999 of Php 2.2 billion was 21% less than prior year's level of Php 2.8 billion. Profit before other income but after financing charges declined to Php 748 million from Php 1.956 billion The basic earnings per share of 13.25 centavos in 1999 from 2.84 centavos in 1998 was computed using a weighted average number of issued and outstanding shares of 17,868 million in 1999 and 11,563 million in 1998. The fully diluted earnings per share were computed at 13.15 centavos in 1999 from 2.73 centavos in 1998 based on a weighted average number of shares of 18,335 million in 1999 and 12,035 million in 1998. Total assets decreased from Php 116.2 billion in 1998 to Php 99.4 billion in 1999 largely as a result of the reduction in development properties. Total debt was reduced to Php 33.4 billion at the end of 1999 from Php 48.3 billion in 1998 as a result of (a) the substantial pay-down on head office debts (b) the deconsolidation of consumer subsidiaries following their disposal and (c) the cancellation of Php 8.8 billion payable to BCDA concerning the return of the 64-hectare property. Current ratio improved from 1.02 in 1998 to 1.16 in 1999. Debt to equity ratio similarly improved from 0.71 in 1998 to 0.51 in 1999 due to the substantial reduction in total liabilities. Total assets to total debt also increased to 2.97 at year end from 2.40 at the end of the previous year. PROPERTY DIVISION FORT BONIFACIO DEVELOPMENT CORPORATION FBDC a subsidiary controlled by Bonifacio Land Corporation and developer of the Global City, recorded net earnings of Php 2.36 billion for the year, an improvement of 30% over net earnings of Php 1.82 billion in 1998. Revenues were booked at P4.8 billion, down 22% compared to the Php 6.2 billion registered in the previous year. The subsidiary has pursued vigorously its development of the Global City as the most modern urban center in East Asia. In January 2000, the company turned over to the Department of Public Works and Highways (DPWH) the Php 915 million Kalayaan fly-over that will improve access to the City from the Makati CBD. It has recently acquired the Philippine Export Zone Authority (PEZA) accreditation to develop 27 hectares of its property into an IT Zone, the proclamation of which is expected towards the end of February. The Big Delta, the seat of the Global City's CBD is due for completion and turn over in April 2000. In mid January 2000, FBDC also commenced the construction of Bonifacio Ridge, initially a twin-tower residential condominium development consisting of a total of 288 units. LANDCO PACIFIC CORPORATION Despite a depressed property market, Landco Pacific Corporation, a 60% owned subsidiary operating in real estate development, consulting and general managers for some of the largest and most respected real estate developers in the country, reported after tax profits of Php 21.3 million, 107% higher than its earnings of Php 10.3 million recorded in 1998. For the year, Landco reported Php 600 million revenues, a 26% decline from the prior year's level of Php 809 million, which were sourced largely from its seaside Punta Fuego Resort development in Batangas. Revenues from the Punta Fuego development consistently exceeded targets. However, other developments contributed less than budgeted results due to the softening real estate prices during the year. PACIFIC PLAZA TOWERS, INC. Pacific Plaza Towers, a prestigious 53-storey twin-tower condominium development in the Global City, delivered Php 510.2 million in net earnings from net sales of Php 2.49 billion in 1999. Gross margins were computed based on a percentage completion of 59.7% as of year-end, translating to a 42.4% incremental percentage completion for 1999. Reservations for the condominium units reached 217 at year's close, 55% of the total 393 units. The residential condominium had topped off both towers in November, one month ahead of schedule, and is still on track for completion in August 2000. TELECOMMUNICATIONS DIVISION Smart, the dominant cellular phone company in the domestic market, yielded net earnings of Php 317 million in 1999, a 39% decrease from 1998 earnings of Php 519 million. The decline in earnings is attributable to lower average revenues per subscriber and the massive costs in launching and promoting its GSM service. Revenues by year-end, however, rose to Php 10 billion from prior year's revenues of Php 8.2 billion, a 23% increase. Smart's cellular subscriber base is the largest in the market, representing 37% of the national subscriber base of 2.76 million. This translates to 1,025,150 subscribers as of year-end, which includes GSM subscribers of 191,294. Subscribers to its Local Exchange Carrier (LEC) segment totaled to 107,456 as of the same date. PACKAGING DIVISION Steniel Manufacturing Corporation (SMC) a 72.6% owned subsidiary involved in the manufacture of corrugated carton packaging products, registered a net income of Php 28 million in 1999 compared to the Php 146 million net earnings obtained in 1998. Significantly high earnings in 1998 was attributed to the recognition of a non-recurring gain from the sale of Starpack, a former subsidiary engaged in the manufacture of flexible materials packaging. Proceeds from the sale were used to pay off debt that substantially reduced the financing charges of the remaining business. SMC undertook measures to streamline its costs by reducing manpower and wastage levels for paper. In early 1999, it set up a corrugated and converting facility Davao to be closer to its major markets. TRANSPORT DIVISION Negros Navigation (Nenaco), a 55% owned subsidiary providing integrated services in shipping, trucking, warehousing, forwarding and delivery of bulk and break-bulk cargoes, reported a loss of Php 777.8 million in 1999 compared with a net loss of Php 847.5 million in 1998. Revenues declined to Php 2.0 billion from previous year's level of Php 2.1 billion. Reduced volume and tonnage, following the de-consolidation of its fast ferry services in 1999 adversely affected Nenaco's results . This was compounded by operational problems in extended and unplanned repairs and maintenance of vessels and the persistent difficulties encountered by its freight division at the Manila terminal. It also lost one of its primary vessels, the St. Francis of Assisi, to an accidental fire in January 1999. The subsidiary's losses however were partly offset by lower financing charges from the issuance of Php 1.5 billion in convertible bonds by MPC to certain creditors of the subsidiary and the generally lower average interest rates in 1999. In terms of contribution to the group however, revenues increased by 44% from Php 1.4 billion in 1998 to Php 9.0 billion in 1999. MPC consolidated full year results in 1999, while it only booked eight months in 1998, commencing from its acquisition of Nenaco in May 1998. prcd BANKING DIVISION PDCP Bank 33% owned by MPC, contributed a loss of a Php 401 million due to prudent lending provisioning and other measures to clean up its balance sheet as well as an industry wide drop in lending rates. The bank is in the process of repositioning itself as an electronic banking-focused financial institution. It is prepared to go beyond traditional banking services and create income-generating products serving new market needs. The bank is proposing to increase its capital to Php 4.4 billion from Php 2.5 billion to expand the bank's balance sheet and strengthen its position in the retail banking business. CONSUMER PRODUCTS AND OTHERS Divestments from Metro Bottled Water and Metrolab took effect on July 1 and August 1, 1999 respectively. These brought in collective gains on sale of Php 1.6 billion for the company. Metrovet, the only remaining subsidiary in the Consumer Products Division and catering to the veterinary and feed additive businesses, yielded gross profits of Php 47 million in 1999 compared to Php 23 million in 1998. This earnings performance was largely a result of a 112% increase in revenues from traditional products and the successful entry of Merial, a new product to the agribusiness market. Ricardo S. Pascua, incoming President and Chief Executive Officer, anticipates a better performance for MPC in the coming year. "With an improved economic environment and a more concentrated focus on property development, we expect that MPC will improve its recurring earnings base in the coming year. Our on-going asset rationalization program will also allow us to continue to reduce consolidated debt levels. We believe that these measures will significantly enhance shareholders value," he said. METRO PACIFIC CORPORATION CONSOLIDATED BALANCE SHEET (UNAUDITED) As at 31 December 31 December (In thousands) 1999 1998 ASSETS Current assets Cash and cash equivalents 2,823,500 2,571,590 Receivables 6,719,925 6,016,094 Due from affiliated companies 322,832 831,257 Inventories 607,189 874,429 Development properties held for sale 2,997,845 2,286,912 Prepayments and other current assets 4,300,942 1,202,553 Deferred income tax asset 785,356 900,376 Total current assets 18,557,589 14,683,211 Long-term receivables 1,826,393 6,407,460 Investments in affiliated companies 10,114,853 8,361,160 Development properties 57,031,054 72,732,718 Property, plant and equipment 6,852,269 6,288,273 Goodwill 127,861 467,240 Other assets 4,885,538 7,257,637 Total assets 99,395,557 116,197,699 LIABILITIES AND EQUITY Current liabilities Loans and notes payable 8,400,399 7,519,977 Current portion of long-term debts 802,763 718,906 Current portion of long-term liabilities and pro 2,377,935 2,194,571 Accounts payable 1,137,491 1,874,514 Accrued expenses and other liabilities 3,203,776 2,071,628 Income tax payable 18,698 7,167 Total current liabilities 15,941,062 14,386,763 Long-term debts 12,677,942 16,147,498 Long-term liabilities and provisions 4,821,669 17,777,114 Equity Stockholders' equity Capital stock 18,602,120 16,877,664 Additional paid-in capital 10,407,348 8,318.053 Retained earnings 4,781,231 2,413,387 Less: Treasury Stock at cost (1,033,000) Outside interests 33,197,185 40,277,220 Total equity 65,954,884 67,886,324 Total liabilities and equity 99,395,557 116.197,699 METRO PACIFIC CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED) For the year ended 31 December 31 December (in thousands) 1999 1998 Revenues 11,596,620 11,265,776 Cost of sales (8,218,656) (7,279,731) Operating expenses (1,175,870) (1,208,501) Operating profit 2,202,094 2,777,544 Equity in net earnings of affiliated companies (280,356) 184,793 Financing charges, net (1,174,204) (1,006,443) Profit before other income 747,534 1,955,894 Other income/(expense).net 2,291,100 (945,868) Profit before taxation 3,038,634 1,010,026 Taxation (77,780) 415,675 Income from continuing operations 2,960,854 1,425,701 Gain/(loss) from discontinued operations 519,149 (8,632) Net income before outside interests 3,480,003 1,417,069 Outside interests (1,076,159) (1,088,131) Net income for the period 2,403,844 328,938 Retained earnings Beginning of period 2,413,387 2,084,449 Preferred share dividends (36,000) End of period 4,781,231 2,413,387 Earnings per share (in centavos) Basic 13.25 2.84 Fully diluted 13.15 2.73 Weighted average number of shares in issue (in thousands) Basic 17,868,139 11,563,282 Fully diluted 18,335,310 12,034,720 Note: 1998 figures have been restated to be comparable with 1999 data involving the deconsolidation of discontinued consumer products business reflected from the third quarter 1999. Result of discontinued operation includes the gain on disposal of the business.